Solyndra, Solar-Panel Maker in California, Seeks Bankruptcy

Solyndra LLC, a solar-panel maker whose $535 million federal loan guarantee was criticized by Republicans, filed bankruptcy, at least the third solar company to seek court protection from creditors since August.

The company owed lenders $783.8 million, including $527.8 million to the U.S. government, and held assets valued at $859 million as of Jan. 1, according to court papers filed in U.S. Bankruptcy Court in Wilmington, Delaware.

Solyndra said it failed because it couldn’t compete with foreign manufacturers funded by their governments. Those factories produced an oversupply of panels at low prices and offered buyers lengthy payment terms. Demand for Solyndra’s panels also fell as European governments reduced incentives for buying solar energy, said W.G. Stover, chief financial officer, in a filing today.

Solyndra couldn’t collect from some customers on time because “foreign competitors offered extended-payment terms, resulting in Solyndra’s customers refusing to honor their previously agreed payment terms,” Stover said in court papers.

While in bankruptcy, Solyndra, based in Fremont, California, will try to either sell its business or liquidate for the benefit of creditors, he said.

The U.S. Federal Financing Bank, owned by the U.S. Treasury Department, is the company’s biggest lender, according to court papers.

Debts Reorganized

In February, Solyndra and its lenders reorganized the company’s debts, putting the U.S. loan behind $69.3 million owed to other lenders, including an affiliate of Solyndra’s biggest shareholder, Argonaut Ventures.

In recent weeks, the U.S. Energy Department, which provided the loan guarantee, negotiated with Solyndra investors for bridge financing to give the company time to find a new source of capital, Stover said. Solyndra was told on Aug. 30 there was no financing, he said.

On Aug. 31, the closely held company shut down, firing 1,100 employees.

Solyndra produces cylindrical panels that convert sunlight into electricity using a thin-film technology based on copper-indium-gallium-diselenide.

The company said it has borrowed $527.8 million from the U.S. Federal Financing Bank using the $535 million Energy Department loan guarantee. The money was combined with notes sold to private investors to fund construction of a new factory, which opened in January.

Loan Guarantee

A collateral agent representing the lenders, including the U.S., holds $198 million Solyndra raised from investors.

Republican lawmakers in the U.S. House of Representatives have criticized the loan guarantee, questioning whether Solyndra deserved the help. Earlier this year, the investigations subcommittee of the House Energy and Commerce Committee began probing the guarantee.

President Barack Obama, who visited the company’s plant in 2010, and Democratic lawmakers said the U.S. must keep supporting renewable energy even amid Solyndra’s failure.

The biggest unsecured claims are held by two trade creditors, Schott North America Inc., owed $7.7 million, and MGS Mfg. Group, owed $7.5 million. Unsecured lenders include the Howard Hughes Medical Institute, owed $4.8 million, OZ Offshore Capital Lenders LLC, with a $3.7 million loan, and US Venture Partners X LP, owed $3.5 million.

Reduced Payroll

Argonaut Ventures holds almost 39 percent of Solyndra’s parent, 360 Solar Degree Holdings Inc. Madrone Partners holds 13 percent of the equity; USVP Venture Partners holds about 9 percent, and Rockport Capital Partners owns about 7 percent, according to filings. The company said it plans to hire Pachulski Stang Ziehl & Jones LLP as legal adviser.

About 113 employees remain “to assist the debtors with their restructuring efforts,” the company said in a filing seeking permission to pay them. The average bi-weekly payroll will be about $650,000, down from $3.5 million before the firings, Solyndra said.

Evergreen Solar Inc. filed bankruptcy last month, blaming price declines and competition from government-subsidized solar-panel makers in China.

The case is In re Solyndra LLC 11-12799, U.S. Bankruptcy Court, District of Delaware (Wilmington).

(Updates with amount owed to the U.S. government in second paragraph.)
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